Tags: eurozone | recession | crisis | euro

UK Telegraph: Eurozone Crisis Isn't Over

By    |   Friday, 16 August 2013 07:45 AM

If you think the eurozone crisis is over, think again.

Optimists believe the eurozone's financial crisis has subsided and an emerging recovery is taking hold.

They're wrong, according to Jeremy Warner, assistant editor of The Telegraph. The European crisis is only dormant. It can re-erupt any time — and probably will sometime in the next year.

Editor’s Note:
Will This Video Get Obama Fired? See the Evidence.

Europe's financial situation may have stabilized, but its economy remains in terrible shape with little sign for improvement any time soon, Warner cautions.

"Unemployment, already at intolerable levels in some eurozone countries, is still rising and money growth remains exceptionally depressed," he writes. "Nor is there any end in sight to credit destruction, with deeply negative implications for SMEs [small and medium enterprises] and future jobs creation."

Warner recounts the list of gloomy factors the eurozone faces.

For instance, the Royal Bank of Scotland says Europe's banks must shed another 3.2 trillion euros worth of assets to meet international capital standards.

The International Monetary Fund estimates that the eurozone's structural unemployment rate, which will remain even after the economy is back to normal, is 10.1 percent, compared with 7.4 percent before the crisis. If that's correct, any recovery will be largely jobless.

Further, the eurozone has made little or no progress toward structural reforms, and its member countries are beset by political instability and gridlock.

One bit of good news is that current account deficits have fallen and even disappeared in some instances.

"Yet, if destroying internal demand counts as success, as indeed it seems to at high command in Berlin, then it's even worse than I thought," Warner says. "Ask not what the euro can do for you, to misquote JFK; ask only what you can do for the euro."

Some commentators who predicted the euro's demise focused only on the union's economic problems and didn't realize that the euro is based on political idealism. That force has kept the euro intact, but has not prompted solutions to its economic problems, he points out.

"All this leads to the conclusion that Europe will remain economically depressed and crisis ridden for a long time to come."

Gross domestic product in the eurozone increased 0.3 percent in the second quarter. The average of 19 economists surveyed by The Wall Street Journal estimated growth at 0.2 percent growth for the second quarter.

Although that seems to indicate the area is starting to climb out of its recession, its outlook remains poor and it may be unable to sustain its recovery, according to The Journal.

Consumer and business confidence, while improving, remain depressed by historical standards, and government austerity plans will suppress public spending and growth.

Editor’s Note: Will This Video Get Obama Fired? See the Evidence.

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Optimists believe the eurozone's financial crisis has subsided and an emerging recovery is taking hold. They're wrong, according to Jeremy Warner, assistant editor of The Telegraph. The European crisis is only dormant. It can re-erupt any time — and probably will sometime in the next year.
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Friday, 16 August 2013 07:45 AM
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